Below is a glossary of terms that are used in the online trading industry. Select the first letter of the word you are seeking from the list above to jump to the appropriate section of the glossary.
Exotic Currency Pairs (Exotics)
What are exotic currency pairs?
Most forex trading involves the major currencies (USD vs. one of the six other major currencies – EUR, GBP, JPY, CHF, CAD, AUD, NZD) or the minor currencies (which do not involve the USD, but do include either the EUR, GBP or JPY). When the USD, or one of the other major currencies is traded against a currency with a far lower trading volume, this is referred to as an exotic trading pair. Examples of the exotics include the USD/RUB (U.S. Dollar vs. the Russian ruble), GBP/TRY (British pound vs. Turkish lira), and EUR/SEK (Euro vs. Swedish krone).
How does one use exotic currency pairs?
Traders who wish to minimize their risks (as well as their potential earnings) might choose to trade exotics because they are more illiquid than the majors and minors. Exotic pairs are affected by many of the same factors that influence currency pairs with greater liquidity, such as economic announcements, geopolitical events, and global weather, and can therefore be used as a good “training ground” for higher risk trading. The Fortrade website offers several exotic pairs from which traders can choose.